As use of the Internet continues to expand, a fundamental change has occurred in the digital content marketplace. For example, the music industry has adopted a new digital form factor used by MP3 players and other digital music players. Pricing schemes for such content, buying behavior and the business model and priorities for the industry have drastically changed as a result of the digital music revolution. For example, digital music can often be purchased via the Internet on an individual song basis, where each song may cost approximately one dollar.
Other industries are likewise re-evaluating future models in order to satisfy consumers and their anticipated purchasing behaviors. For example, software companies are evaluating new and more dynamic ways to package, distribute and price software, such as via the Internet. In many cases, using the Internet to distribute software to purchase subscriptions to Internet websites and the like will result in an increase in micropayment transactions (transactions having payments under approximately $5). It is projected that 30 billion micropayment transactions will take place globally by 2010.
One problem with micropayment transactions is that the cost of obtaining payment from the user is high with respect to the purchase price. Current methods of obtaining payment include 1) repeated, single instance payments, 2) aggregating payments, 3) proprietary pre-paid accounts and 4) proprietary payment processing systems.
Repeated, single instance payments occur when, for example, a credit card is charged once for each micropayment transaction. Acquirers cannot viably provide such a service to merchants because the cost of processing a transaction is too high relative to the transaction amount and standard fee structures. On the other hand, consumers are required to present too much data (i.e., full card details) relative to the size of the payment. Moreover, consumers can have concern regarding control over their data.
Some merchants aggregate payments in an attempt to overcome these deficiencies. However, payment aggregation does not lessen the cost of processing transactions for all consumers. While the per transaction cost of high-volume consumers is reduced, a low-volume consumer might only make one or two transactions within a billing period. As such, standard fee structures still make the cost of processing transactions for low-volume consumers prohibitive for the acquirer. In addition, payment aggregation causes the merchant to bear an increased risk for unprocessed transactions. For example, a consumer might only purchase a single item, but the merchant would not process the transaction until the end of the billing period, by which time the consumer's payment card may have exceeded its limit or have been compromised. The consumer can also lose granularity in his transaction statement because all transactions are aggregated into a single transaction.
Proprietary pre-paid accounts are used for some pay-for-use services. Such accounts are typically used on a per-merchant basis. As such, the services are not generally compatible across business and/or geographic boundaries. Proprietary pre-paid accounts also require consumers to manage separate accounts for each merchant with which they are working and dedicate cash resources to each account.
Proprietary payment processing systems, in which each merchant's contract with a third party system to process payments, disadvantage consumers in substantially the same way as proprietary pre-paid accounts. In addition, merchants are required to make significant investments in infrastructure in order to develop such systems.
It would be desirable to have methods and systems for enabling ubiquitous micropayments in order to expand online purchasing opportunities for merchants and consumers while also being commercially viable for the facilitating entities, e.g. issuers and acquirers.
The present disclosure is directed to solving or overcoming one or more of the problems described above in the context of a broader, seamless payment solution in which micropayment is one of a plurality of payments facilitated. As such, much of the distinct functionality of the described methods and systems also has unique value to a broader range of payment types.